New Consumer Credit Rules

Credit reporting in Australia will go through its biggest change in recent memory. As part of the reforms to the Privacy Act 1988 (Privacy Act), credit reporting in Australia is regulated by a new Part IIIA of the Privacy Act. The new Part IIIA, which comes into effect on 12 March 2014, allows for more comprehensive credit reporting.The new credit reporting laws will commence on 12 March 2014 and regulate what personal information can be included on an individual’s credit report and how that information can be handled. This includes how long that information can be retained on an individual’s credit report. This will expand the information that lenders get about the personal credit histories of consumers and business owners. Business owners should also be aware that their personal credit histories will also come under the scanner when applying for a business loan on behalf of their company.

As part of a Credit assessment, lenders will normally go into the personal credit history of the individual and/or the business. The new rules will now expand the credit history in a more detailed manner. The personal financial conduct is a factor in a credit decision. This means borrowers will have to tidy up their financial affairs ahead of the changes.

The new move from the current reporting pattern to a more comprehensive reporting will allow credit bureaus like Veda to include a lot more information on credit files. The aim of the reforms is to facilitate better assessment of consumer credit risk by creating greater transparency. The main issue is the inclusion of Repayment History Information (RHI) of Individual. Late payments will be noted through a score given to each credit account. This means it is important now to pay accounts on time. RHI provides evidence of a borrower’s willingness to meet loan circumstances. The new rules will also enable the lenders to see how many credit contracts a person already has. Persons having a tendency to take up credit cards or personal loans without thinking about them, should now think twice before taking up any such offers.More contracts means you are a serviceability risk and credit when needed may not be forthcoming. This is the time when one should start trimming their loan portfolio by consolidation.

About Repayment History Information

RHI is information about whether you have met your consumer credit payment obligations. Consumer credit is credit that is intended to be used primarily for personal, family or household purposes.

RHI includes information about whether you have made a payment on time or whether you have missed a payment. If you only pay part of the amount owing, you are taken to have missed a payment.RHI can include both positive and negative information about your credit history.

It does not include the amount of any missed payment — only the fact that you have made or missed a payment.

RHI can only relate to payments that you have made or missed from December 2012. Then from March 2014 licenced credit providers can pass your RHI on to credit reporting bodies.

This means that if you fail to make the full amount of a payment on time from December 2012 it may affect your ability to obtain credit in the future.

Information about any particular payment cannot be held for more than two years from the date it was due.

However, RHI will not include information about any payment that was due before December 2012.

From 12 March 2014, any personal information permitted to be included on an individual’s credit report must be handled in accordance with the new laws. This includes personal information that was in a credit report before that date. This means that the new laws will determine how long that information can be held on an individual’s credit report.

How long information is permitted to be kept on an individual’s credit report varies depending on the type of information. Under the new laws, some of the retention periods have been shortened, while others are unchanged. Importantly, once the relevant retention period ends, the personal information must be removed from the individual’s credit report within 1 month.

Where the retention period has been shortened, the new shorter retention period applies. Importantly, the new retention period will apply from the date that information was first included on the credit report, and not from the 12 March 2014. This means, for example, that any information included on an individual’s credit report prior to 12 March 2014, for which the new retention period has expired, must be removed by 12 April 2014, even if the old retention period may not have expired.

One significant outcome of the new regime is it could benefit consumers with an impeccable credit track record. They would be the darling of the credit providers and should be in a position to call the shots.